WP(C)/4359/2019 on 31 August, 2024

[Cites 33, Cited by 0]

Gauhati High Court

WP(C)/4359/2019 on 31 August, 2024

HON'BLE MR. JUSTICE SOUMITRA SAIKIA Advocate for the petitioner :Dr. A. Saraf, Senior Counsel assisted by Mr. P. Baruah, Advocate Advocate for the respondents :Mr. B. Gogoi, Standing Counsel, Finance & Taxation Department.

                       Judgment Reserved on           :11.06.2024

                       Date of Judgment & Order       : 31.08.2024

                                           JUDGMENT AND ORDER (CAV)

This Writ Petition has been filed praying for quashing / recall of the Notice dated 03/07/2018 and the subsequent Reminder Notice dated 27/11/2018 issued by the Office of the Assistant Commissioner of Taxes, Unit-A, Guwahati directing the Petitioner to deposit the balance payable amount against the transaction mentioned in Form 'C' bearing No.OGC33242316909 received from M/s Om Traders, Gurugram, Haryana, which was subsequently cancelled by the Haryana VAT Authority.

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2. The Petitioner is a company incorporated under the provisions of the Companies Act, 1956 and is having its Registered Office at 98, Okhla Industrial Estate, Phase-III, New Delhi-110020. The Petitioner, in the year 2015-16, sold Pan Masala amounting to Rs.62.60 Crore including tax from it'smanufacturing units located at Guwahati to M/s Om Traders, Gurugram on concessional rate of tax under the applicable provisions of Central Sales Tax Act.M/s Om Traders was a registered dealer and carried a valid 'Registration Certificate' under section 11 of the Haryana Value Added Tax Act, 2003 with the Tax Identification Number (TIN) 06691950815 and was issued a 'Certificate of Registration' as a dealer under Section 7(1) / 7(2) of the Central Sales Tax Act, 1956.

3. The Petitioner transacted with M/s Om Traders , Gurugram by selling them its finished product 'Pan Masala' from its manufacturing units located at Guwahati (Assam) for the period starting from 29/01/2016 to 29/03/2016 for a total taxable value of Rs. 61,37,43,561/- and paid Central Sales Tax of Rs. 1,22,74,871/- at prescribed concessional rate of 2% of value of goods to Assam VAT Authority in accordance with the Section 8(1) read with Section 8(4) of the Central Sales Tax Act, 1956 and the Rule 12(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957. W.P(C) No. 4359/2019 Page 3 of 46

4. As required under the provisions of law, petitioner obtained statutory Form-C declaration from M/s Om Traders issued on 09.05.2017 in favour of the petitioner for the period 01.01.2016 to 31.03.2016.

5. This Form 'C' covers entirely the above mentioned inter-State sale to M/s Om Traders by the petitioner, and therefore, the tax liability under the applicable CST Act on the petitioner is determinable at concessional rate of 2%. All the goods were sold by petitioner to M/s Om Traders, Gurugram under the proper excisable sale invoices and there is no dispute in this regard.

6. However, the Assistant Commissioner of Taxes, Unit-A, Guwahati, vide the impugned Notice dated 03.07.2018 directed the petitioner to deposit the balance amount of tax against the above mentioned inter-State sale to M/s Om Traders on the ground of the Form 'C' issued to the petitioner by the M/s Om Traders, being declared obsolete by the Haryana Government.

7. The petitioner, in reply to the above notice, sent a letter dated 27.08.2018 to the respondent No. 3 noting that both the parties, i.e. the petitioner and M/s Om Traders, were registered dealers in their respective states and made inter-State sale transaction on principal to principal basis, with genuine and valid documents. Therefore, W.P(C) No. 4359/2019 Page 4 of 46 there was no reason to treat the transaction undertaken against the subject From 'C' as obsolete. The petitioner, as a proof of compliance with the applicable Central Sales Tax laws, also enclosed with the above letter the VAT and CST registration certificate of M/s Om Traders, copies of all the Sale Invoices under which goods were sold to M/s Om Traders, copy of From-63 issued by VAT Department of Assam and other necessary documents.

8. The respondent No. 3 however, without taking into consideration the above reply of the petitioner, sent the impugned reminder Notice dated 27.11.2018 to the petitioner reiterating that the Form 'C' of M/s Om Traders, Gurugram has been declared obsolete by the Haryana Government and therefore directed the petitioner to deposit the balance amount of tax i.e. the applicable tax in case of local sale (sale within the state of Assam) less central sales tax already paid by the petitioner on such goods.

9. Being aggrieved, the present writ petition has been filed assailing the impugned Notices issued by the respondent No. 3 treating the same conducted by the petitioner outside the State to be a sale within the State.

10. Referring to Section 8 (1) of the Central Sales Tax Act, 1956 (hereinafter referred to as the Act), it is submitted that every dealer, W.P(C) No. 4359/2019 Page 5 of 46 who in the course of the inter-State trade or commerce, sells to a registered dealer goods of the description referred to in sub-section (3), shall be liable to pay tax under this Act, which shall be 2%(two percent) of his turnover or at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State, whichever is lower.

11. He submits that under Section 8(4) of the Act, it is provided that the provisions of sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a particular form obtained from the prescribed authority.

12. Referring to Rule 12(1) of the CST Rules, it is submitted that the said Rule provides that the declaration and the Certificate referred to in sub-section (4) of section 8 shall be in Forms C and D respectively. It is further provided thereunder that a single declaration may cover all transactions of sale, which take place in a quarter of a financial year between the same two dealers.

13. The learned Senior Counsel referring to these provisions of the CST Act as well as CST Rules submits that from a plain reading of W.P(C) No. 4359/2019 Page 6 of 46 the Rule 8 (1) and 8(4) of the Central Sales Tax Act, 1956 and Rule 12(1) of the Central Sales Tax (Regulation and Turnover) Rules, 1957 it will be clear that in order to get the benefit of the rate of tax in respect of the sales of the goods to the registered dealer in course of trade or commerce, the selling dealer has to produce a declaration form in Form C issued by the purchasing dealer and the petitioner in compliance of the above provisions obtained the statutory Form C declaration issued by M/s Om Traders on 09.05.2017 in favour of the petitioner for the period 29.01.2016 to 29.03.2016.

14. It is submitted that the Form 'C' covered the above mentioned inter-State sale to M/s Om Traders by the Petitioner, and therefore, the tax liability under the applicable CST Act on the Petitioner was determinable at concessional rate of 2%. All the goods were sold by Petitioner to M/s Om Traders, Gurugram under the proper sale invoices along with Form 63 duly recorded at check post of Assam and there is no dispute in this regard.

15. The further submission of the learned Senior counsel is that the Assistant Commissioner of Taxes, Unit-A, Guwahati, vide the Impugned Notice dated 03/07/2018 directed the Petitioner to deposit the balance amount of tax against the above-mentioned inter-State sale to M/s Om Traders on the ground that the Form 'C' issued to the W.P(C) No. 4359/2019 Page 7 of 46 Petitioner by the M/s Om Traders, being declared obsolete by the Haryana Government. However, in the Affidavit-in-Opposition filed a communication made by the Excise and Taxation Officer-cum- Assessing Authority, Gurgaon, Haryana to the Deputy Commissioner of Tax, Guwahati Zone - A, Assam has been annexed which clearly reflects that the 'C' Form was only cancelled and that the department was in the process of declaring the forms as obsolete.Even today Haryana VAT portal does not show that the said "C" Form has been declared obsolete. Thereby the impugned notice dated 03.07.2018 issued by the respondents is absolutely illegal and without jurisdiction inasmuch as the same has been issued on the ground that the 'C' Forms in question was declared obsolete by the concerned authorities whereas the said 'C' Form was only cancelled and was not declared obsolete by the Haryana Taxation Authority.

16. It is submitted on behalf of the Petitioner that in reply to the above notice, the petitioner sent a letter dated 27/08/2018 to the Respondent No. 3 pointing outthat both the parties, i.e. the Petitioner and M/s Om Traders, were registered dealers in their respective states and the inter-State sale was made on principal to principal basis, with genuine and valid documents. Therefore, there was no reason to treat the transaction undertaken against the subject Form 'C' as obsolete whereas the said 'C' Form was only said to have been W.P(C) No. 4359/2019 Page 8 of 46 cancelled by the Excise and Taxation Officer - cum - Assessing Authority, Gurgaon, Haryana and the said 'C' Form was not declared to be obsolete. The Petitioner, as a proof of compliance with the applicable Central Sales Tax laws, also enclosed with the above letter the VAT and CST registration certificate of M/s Om Traders, copies of all the sell Invoices under which goods were sold to M/s Om Traders, Copy of Form-63 issued by VAT Department of Assam and other necessary documents.

17. The learned Senior counsel therefore submits that the Respondent No. 3, however, without taking into consideration the above reply of the Petitioner, sent the Impugned Reminder Notice dated 27/11/2018 to the Petitioner reiterating that the Form 'C' of M/s Om Traders, Gurugram has been declared obsolete by the Haryana Government, and therefore, directing the Petitioner to deposit the balance amount of tax that is applicable tax in case of local sale (sale within the state of Assam) less central sales tax already paid by the Petitioner on such goods. Since the 'C' Form was never declared obsolete by the Haryana Government and was only cancelled, which will be apparent from the communication dated 19.02.2015 (Annexure - B to the Affidavit-in-Opposition), the impugned Notice is absolutely illegal and without jurisdiction. W.P(C) No. 4359/2019 Page 9 of 46

18. It is further submitted that in the instant case, the Petitioner effected an inter-State sale of 'Pan Masala' worth Rs. 62.60 Cr (including CST) to M/s Om Traders on applicable concessional tax rate as prescribed under the provisions of Central Sales Tax Act, 1956 for the period starting from 29/01/2016 to 29/03/2016, on which Central Sale Tax amounting to Rs. 1,22,74,871.22/- was undisputedly paid by the Petitioner to Assam VAT Authority.

The said goods moved from the State of Assam under prescribed Form-63 issued under Rule 41(9) of the Assam VAT Rules, 2005 and considered as valid 'Dispatch Note' under Rule 4A of the Central Sales Tax (Assam) Rules to be produced before the officer-in- charge at the last check post for dispatching the taxable goods outside the State of Assam.

19. He submits that copies of Form-63 issued under Rule 41(9) of the Assam VAT Rules is considered as valid 'Dispatch Note' under Rule 4A of the Central Sales Tax (Assam) Rules which are to be produced before the Officer In-charge of the last check post for dispatch the goods outside the State of Assam along with the copies of the receipts showing proof of delivery to M/s Om Traders and copies of the extract of the Ledger account of the manufacturer as per the books of accounts of the respective units from where the W.P(C) No. 4359/2019 Page 10 of 46 goods were sold to M/s Om Traders reflecting the sales made and the payments received are all enclosed to the writ petition.

20. It is submitted that the purchasing dealer i.e. M/s Om Traders duly provided the statutory Form C' to the Petitioner for obtaining the benefit under Section 8 of CST Act. Section 8(1) of the CST Act provides that every dealer, engaged in inter-State sale, is liable to pay tax at the rate of two percent of his turnover or at the rate applicable under the sales tax law of that State, whichever is lower. However, Section 8(4) provides that the provisions of Section 8(1) shall not apply unless the dealer selling the goods furnishes a declaration in the prescribed form as per the Rules. Rule 12(1) of the CST (R&T) Rules provides that for the purpose of Section 8(4), the declarations shall be in Forms C. Thus, until the dealer furnishes a declaration by way of Form 'C', it shall not be entitled to the benefit of concessional rate of tax provided under Section 8(1).

The Petitioner after having obtained the prescribed Form C, from the M/s Om Traders for the period starting from 01/01/2016 to 31/03/2016, duly furnished, the said Form 'C' declaration to the Respondent No. 3. Therefore, the Petitioner, having complied with all the requirements stipulated under the CST Act, is entitled to the benefits of the concessional rate of tax under Section 8(1). W.P(C) No. 4359/2019 Page 11 of 46

21. The learned Senior counsel submits that the Impugned Notices have been issued without appreciation of complete facts and the reply sent by the Petitioner vide its letter dated 27/08/2018. This can be seen from a bare perusal of the Impugned Notices itself. Both the Impugned Notices are identical. It is submitted that despite the reply by the Petitioner on 27/08/2018, enclosing the necessary documents, the Respondent authority has sent the same Impugned Notice dated 27/11/2018 reminding the Petitioner again to deposit the balance amount of tax payable without addressing the submissions stated in the reply by the Petitioner. The Petitioner further submitted its reply to Notice dated 21/11/2018 on 19.01.2019 along with relevant documents. It issubmitted that the Impugned Notices stated that the Form 'C' issued by the M/s Om Traders has been declared obsolete,therefore, the balance amount of tax against the inter-State sale transaction undertaken by the Petitioner is payable. It is submitted that the Impugned Notices do not mention the provision of law under which it is issued. It is further submitted that the Impugned Notices do not provide the reasons as to how the Form 'C' validity issued to the Petitioner initiallyand subsequently declared obsolete will affect the tax liability of the Petitioner who under bona fide belief effected inter-State sale transaction with the M/s Om Traders.

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22. It is submitted that since the impugned notice has been issued on grounds, which do not exist inasmuch as the 'C' Form was never declared to be obsolete but was only said to have been cancelled, whereas the impugned notices have been issued on the ground that the said 'C' Form was declared to be obsolete and the impugned notices are absolutely illegal, without jurisdiction & the same is liable to be set aside and/or quashed. Further, the impugned notices directing the petitioner to make payment of tax is also illegal and without jurisdiction inasmuch as the same has been issued without any adjudication of the issue by the assessing officer and thereby the impugned notices being absolutely illegal and without jurisdiction, the present writ application is maintainable.

23. The further submission of the learned Senior counsel is that the Petitioner submits that it is a settled law that when the statutory functionary makes an order passed on certain grounds its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reason and cannot be supplemented by fresh reason by the affidavit or otherwise.

24. In support of his contentions, the learned Senior counsel relies upon the following Judgments:

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"(i) Mohinder Singh Gill & Anr. Vs. The Chief Election Commissioner, New Delhi & Ors, reported in (1978) 1 SCC 405;

(ii) State of Madras Vs. Radio and Electricals Ltd., reported in AIR 1967 SC 234;

(iii) A.D.M. Stores Vs. CST, reported in (1966) 18 STC 305, 310 (Punj);

(iv) State of Orissa Vs. Santosh Kumar, reported in (1983) 54 STC 322 (Orissa);

(v) State of Maharashtra Vs. Suresh Trading Company, reported in (1998) 109 STC 439 (SC);

(vi) Shanti Kiran India Pvt. Ltd. Vs. Commissioner Trade & Tax Department, reported in (2013) 57 VST 405 (Delhi);

(vii) Balabhagas hulaschand Vs. State of Orrisa, reported in (1976) 2 SCC 41;

(viii) Jain Manufacturing Vs. The Commissioner VAT, reported in (2016) 93 VST 326;

(ix) Agfa-Gavert India Ltd. Vs. State of Tamil Nadu, reported in (2001) 123 STC 108;

(x) Emami Agrotech Ltd Vs. The Commission, VAT [W.P.(C) No. 6749/2016]

(xi) Combined Traders Vs. State of Rajasthan, [W.P(C) No. 1158/2018]"

25. Relying on these Judgments, the learned Senior counsel submits that the only obligation on the petitioner is that he has to satisfy himself that the purchaser namely M/s Om Traders is a registered dealer and the goods are to be specified in the certificate of registration. He submits that once that satisfaction is arrived at by the petitioner, the duty iscast upon the petitioner to make the enquiry and verify the particulars does not extend beyond. W.P(C) No. 4359/2019 Page 14 of 46

26. The learned senior counsel submits that the Form 'C' which was issued to the petitioner was generated and downloaded from the Haryana VAT website and was issued against with the above mentioned transaction on 09.05.2017. Referring to the said Form 'C', he submits that it had all details including the TIN details of the petitioner and the purchaser namely M/s Om Traders the period of 'C' form, the transactions against which the form was issued, the details of the place of business are all clearly specified. Therefore, the declaration on the Form 'C' on the day it was issued was valid under the law and the petitioner relying on the same had availed the concessional benefit of Tax under Section 8(1) read with Section 8(4) of the CST Act. He therefore submits that a subsequent declaration that the 'C' Form has become obsolete will not affect the rights which has already accrued to the writ petitioner during the relevant period in question. It is further submitted that these impugned notices were issued arbitrarily and without any application of mind and that apart these notices were issued without completion of the assessment proceedings. Such action on the part of the petitioner is contrary to the provisions of law and wholly without jurisdiction. The learned Senior counsel submits that the impugned notice is contrary to the provisions of law and cannot be permitted to stand as the demand of tax raised in respect of the writ petitioner was without making any W.P(C) No. 4359/2019 Page 15 of 46 assessment. He submits that the notice for recovery of demand can only be issued after completion of the assessment. He relies on the Judgment rendered in Whitney Vs. Commissioner of Inland Revenue, reported in (1926) A.C. 37 at Page-52. He also refers to and relies upon the Judgment of the Apex Court rendered in C.C.E. Vs. national Tobacco 28 Co. of India Ltd. reported in (1972) 2 SCC 560 in support of his contention that there is distinction between the term "levy" and the term "assessment". He submits that the Apex Court distinguished between the term "levy" and "collection". He is also relied on the Judgment of the Apex Court rendered in Somaiya Organics (India) Ltd. Vs. State of U.P., reported in (2001) 5 SCC 519 in support of his contention. It is further submitted that issuance of notice of demand is a condition precedent to the treatment of the tax as an arrear. He submits that there has to be proof of actual steps which constitute an assessment prior to imposition of a levy. In support of his contention, he has referred to the Judgment rendered in Assistant Collector of General, Kolkata Division Vs. National Tobacco Co. of India Ltd., reported in (1972) 2 SCC 560. He therefore submits that no assessments have been completed for the period in question. There is no occasion to issue a notice of demand and therefore the impugned notice dated 03.07.2018 as well as the reminder dated 27.11.2018 cannot be treated to be notices of demand and the same W.P(C) No. 4359/2019 Page 16 of 46 are therefore illegal without jurisdiction and are liable to be set aside and quashed.

27. Mr. B. Gogoi, learned Standing Counsel, Finance submits that the department has filed an affidavit-in-opposition disputing the contentions of the writ petitioner. He submits that the notices impugned in the present writ petition are required to be issued by the Department in view of the communication dated 19.02.2018 received from the Excise and Taxation Officer-Cum-Assessing Officer in the State of Haryana. Referring to the said communication, the learned counsel for the respondents submits that the said communication which was enclosed to the affidavit in opposition as annexure-B has intimated the Deputy Commissioner of Tax, Guwahati Zone-A, Assam that some unknown person fraudulently has obtained 'C' Forms from the Office showing purchaser as M/s Om Traders holding TIN No. 18560016909. The said Forms have been stated to have been obtained for the period 01.01.2016 to 31.03.2016. The letter therefore intimates the competent department in the State of Assam that the Haryana State Tax Department is in the process of declaring the 'C' forms obsolete and therefore, the competent authorities of the State of Assam are required to not give the benefit of concessional sales to the dealer in the State of Assam as no purchases have been made by the Haryana dealer and the 'C' Form issued for these W.P(C) No. 4359/2019 Page 17 of 46 transactions cancelled. Mr. Gogoi submits that in view of this letter, the department is bound to issue consequential orders and therefore the notices impugned in the writ petition were issued. It is submitted that the said intimation was received by E-mail from the Excise & Taxation officer-Cum-Assessing Authority, Haryana. It is submitted that on receipt of this letter, it is apparent that the 'C' Forms which were issued and presented before the State authorities are fake and therefore the petitioner is not entitled to the concessional rate of tax and therefore the authorities were within their rights to require the petitioner to pay the balance amount of Tax. It is further submitted that there is an efficacious alternative remedy prescribed under the Act under Section 79 for an appeal to be preferred before the prescribed higher authority.

28. The learned Standing Counsel further questions the maintainability of the writ petition on the ground of non-joinder of proper parties. He submits that the contention of the petitioner cannot be verified without the presence of the purchaser namely M/s Om Traders in the State of Haryana as well as the Haryana Tax Department which has intimated the Department of Finance, Government of Assam that pursuant to which the notices which are impugned in the present writ petition have been issued. He however, fairly submits on instructions that no assessment proceedings were W.P(C) No. 4359/2019 Page 18 of 46 undertaken prior to issuance of the notice. These notices were issued on the communication received from the State of Haryana requesting the petitioner to voluntarily deposit the Tax amount which he had unauthorizedly availed of at the concessional rate.

29. The learned counsel for the parties have been heard. Pleadings on records have been carefully perused. Upon due consideration of the rival arguments, the following questions fall for consideration before this Court.

(i) The responsibility cast upon the selling dealer towards the Form-C issued by the purchasing dealer in the State of Haryana;

(ii) The effect of subsequent cancellation of Form 'C' declaration on the selling dealer;

(iii) Whether the impugned notices can be construed to be demand notices and whether the same can be issued without initiation or completion of any assessment proceedings and whether the respondent authority is competent to issue such demand.

(iv) Consequently whether the impugned notices were issued arbitrarily and required interference by this Court.

30. In order to appreciate the import of Form 'C' under the Sales Tax Laws, it is necessary to refer to the relevant Section and Rules.

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Section 8(1) prescribes the rate of tax in respect of an inter-State Trade or Commerce where the sale is effected to a registered dealer of the goods of the description referred to in Sub-section 3.

Sub-section 3 of Section 8 prescribes forthe goods referred to in clause (b) of sub-section(1) -

[***].

[b] [* * * ] are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for re- sale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in mining or in generation or distribution of electricity or any other form of power;

(c) are containers or other materials specified in the certificate of registration of the registered dealer purchasing the goods, being containers or materials intended for being used for the packing of goods for sale;

(d) are containers or other materials used for the packing of any goods or classes of goods specified in the certificate of registration referred to in [***] clause (b) or for the packing of any containers or other materials specified in the certificate of registration referred to in clause (c).

W.P(C) No. 4359/2019 Page 20 of 46 Under Section 8(4), it is provided that the provisions of Sub- section 1 of Section 8 shall not apply to any sale in the course of inter-State Trade or Commerce unless the dealer selling the goods furnishes to the prescribed authority in the manner prescribed, a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in the particular form from the prescribed authority.

The prescribed form is found to be described under Rule 12(c) of the CST (Regulation and Turnover) Rules, 1957.

Under Rule 12(c), the declaration and the certificate which is referred to in Section 8(4) of the CST Act shall be Form-'C' and Form 'D' respectively.

The relevant provisions of the Section 8 as well as the Rule 12 of the CST Rules are extracted below:

8. Rates of tax on sales in the course of inter-State trade or commerce.-- [(1) Every dealer, who in the course of inter-State trade or commerce, sells to a registered dealer goods of the description referred to in sub-section (3), shall be liable to pay tax under this Act, which shall be three per cent of his turnover or at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State, whichever is lower :

Provided that the Central Government may, by notification in the Official Gazette, reduce the rate of tax under this sub-section.

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(2) The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter-State trade or commerce not falling within sub-section (1), shall be at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State.

(2-A) [* * *] (3) [The goods referred to in sub-section (1),--]

(a) [Omitted].

[(b) are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for re-sale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing for sale of goods specified under clause (d) of Section 2;]

(d) are containers or other materials used for the packing of any goods or classes of goods specified in the certificate of registration referred to in *** clause (b) or for the packing of any containers or other materials specified in the certificate of registration referred to in clause (c). [(4) The provisions of sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority:

Provided that the declaration is furnished within the prescribed time or within such further time as that authority may, for sufficient cause, permit.] W.P(C) No. 4359/2019 Page 22 of 46 (5) Notwithstanding anything contained in this section, the State Government may [on the fulfilment of the requirements laid down in sub-section (4) by the dealer,] if it is satisfied that it is necessary so to do in the public interest, by notification in the official Gazette, and subject to such conditions as may be specified therein, direct,--

(a) that no tax under this Act shall be payable by any dealer having his place of business in the State in respect of the sales by him, in the course of inter-State trade or commerce [to a registered dealer [* * *]], from any such place of business of any such goods or classes of goods as may be specified in the notification, or that the tax on such sales shall be calculated at such lower rates than those specified in the notification, or that the tax on such sales shall be calculated at such lower rates than those specified in sub-section (1) [* * *] as may be mentioned in the notification;

(b) that in respect of all sales of goods or sales of such classes of goods as may be specified in the notification, which are made, in the course of inter-State trade or commerce [to a registered dealer [* * *]], by any dealer having his place of business in the State or by any class of such dealers as may be specified in the notification to any person or to such class of persons as may be specified in the notification, no tax under this Act shall be payable or the tax on such sales shall be calculated at such lower rates than those specified in sub-section (1) [* * *] as may be mentioned in the notification.

[(6) Notwithstanding anything contained in this section, no tax under this Act shall be payable by any dealer in respect of sale of any goods made by such dealer, in the course of inter-State trade or commerce to a registered dealer for the purpose of setting up, operation, maintenance, manufacture, trading, production, processing, assembling, repairing, reconditioning, re-engineering, packaging or for use as packing material or packing accessories in an unit located in any special economic zone or for development, operation and maintenance of special economic zone by the developer of the special economic zone, if such registered dealer has been authorised to establish such W.P(C) No. 4359/2019 Page 23 of 46 unit or to develop, operate and maintain such special economic zone by the authority specified by the Central Government in this behalf.] (7) The goods referred to in sub-section (6) shall be the goods of such class or classes of goods as specified in the certificate of registration of the registered dealer referred to in that sub-section. (8) The provisions of sub-sections (6) and (7) shall not apply to any sale of goods made in the course of inter-State trade or commerce unless the dealer selling such goods furnishes to the [prescribed authority referred to in sub-section (4) a declaration in the prescribed manner on the prescribed form obtained from the authority specified by the Central Government under sub-section (6)], duly filled in and signed by the registered dealer to whom such goods are sold. Rule 12 (1) The declaration and the certificate referred to in sub- section (4) of section 8 shall be in Forms 'C' and 'D' respectively:

[Provided that Form 'C' in force before the commencement of the Central Sales Tax (Registration and Turnover) (Amendment) Rules, 1974 or before the commencement of the Central Sales Tax (Registration and Turnover) (Amendment) Rules, 1976, may also be used upto the 31st December, 1980, with suitable modifications:] [Provided further that a single declaration may cover all transactions of sale, which take place in a quarter of a financial year between the same two dealers.

Provided also that where, in the case of any transaction of sale, the delivery of goods is spread over to different quarters in a financial year or of different financial years, it shall be necessary to furnish a separate declaration or certificate in respect of goods delivered in each quarter of a financial year.] (2) Where a blank or duly completed form of declaration is lost, whether such loss occurs while it is in the custody of the purchasing dealer or in transit to the selling dealer, the purchasing dealer shall furnish in respect of every such form so lost, an indemnity bond [in Form G] to the notified authority from whom the said form was W.P(C) No. 4359/2019 Page 24 of 46 obtained, for such sum as the said authority may, having regard to the circumstances of the case, fix. Such indemnity bond shall be furnished by the selling dealer to the notified authority of his State if a duly completed form of declaration received by him is lost, whether such loss occurs while it is in his custody or while it is in transit to the notified authority of his State:

[Provided that where more than one form of declaration is lost, the purchasing dealer or the selling dealer, as the case may be, may furnish one such indemnity bond to cover all the forms of declarations so lost.] (3) Where a declaration form furnished by the dealer purchasing the goods or the certificate furnished by the Government has been lost, the dealer selling the goods may demand from the dealer who purchased the goods or, as the case may be, from the Government which purchased the goods, a duplicate of such form or certificate, and the same shall be furnished with the following declaration recorded in red ink and signed by the dealer or authorised officer of the Government, as the case may be, on all the three portions of such form or certificate,--

"I hereby declare that this is the duplicate of the declaration form/ certificate No. ............ signed on ........ and issued to ............... who is a registered dealer of ............................ (State) and whose registration certificate number is ................"

(4) The certificate referred to in sub-section (2) of section 6 shall be in Form 'E-I' or Form 'E-II' as the case may be.

(5) The declaration referred to in sub-section (1) of section 6-A shall be in Form 'F':

[Provided that a single declaration may cover transfer of goods, by a dealer, to any other place of his business or to his agent or principal, as the case may be, effected during a period of one calendar month:

Provided further that if the space provided in Form 'F' is not sufficient for making the entries, the particulars specified in Form 'F' may be W.P(C) No. 4359/2019 Page 25 of 46 given in separate annexure attached to that form so long as it is indicated in the form that the annexures form part thereof and every such annexure is also signed by the person signing the declaration in Form 'F':

Provided further that Form 'F' in force before the commencement of the Central Sales Tax (Registration and Turnover) (Second Amendment) Rules, 1973, may continue to be used up to 3 [31st day of December, 1980] with suitable modifications.] (6) Form 'C' referred to in sub-rule (1), or as the case may be, Form 'F' referred to in sub-rule (5), shall be the one obtained by the purchasing dealer or, as the case may be, the transferee in the State in which the goods covered by such form are delivered.

[(7) The declaration in Form C or Form F or the certificate in Form E-I or Form E-II shall be furnished to the prescribed authority within three months after the end of the period to which the declaration or the certificate relates:

Provided that if the prescribed authority is satisfied that the person concerned was prevented by sufficient cause from furnishing such declaration or certificate within the aforesaid time, the authority may allow such declaration or certificate to be furnished within such further time as that authority may permit.] (8) (a) The person referred to in clause (a) of sub-rule (1) of rule 3 shall alone be competent to sign the declaration in Form 'C' or Form 'F' or the certificate in Form 'E-I' or Form 'E-II':

[Provided that where such person is a proprietor of any business or a partner of a firm or a karta or manager of a Hindu undivided family, any other person authorised by him in writing may also sign such declaration or certificate :] [Provided further that in the case of a company, such declaration or certificate can also be signed by any other officer of the company authorised under the Memorandum or Articles of Association of the company or under any other special or general resolution of the W.P(C) No. 4359/2019 Page 26 of 46 company or under a resolution passed by the Board of Directors of the company, to authenticate any document on behalf of such company.]

(b) Such person shall signify on such declaration or certificate his status and shall make a verification in the manner provided in such declaration or certificate.

(9) (a) The provisions of 3 [***] sub-rule (2) and sub-rule (3) shall, with necessary modifications, apply to the declaration in Form 'F' or the certificate in Form 'E-I' or Form 'E-II'.

[(b) The provisions of the second and third provisos to sub-rule (1) shall, with necessary modifications, apply to certificates in Form 'E-I' or Form 'E-II'.] [(10)(a) the declaration referred to in sub-section (4) of section 5 shall be in Form H and shall be furnished to the prescribed authority upto the time of assessment by the first assessing authority.] [(b) The provisions of the rules framed by the respective State Government under sub-sections (3), (4) and (5) of section 13 relating to the authority from whom and the conditions subject to which any form of certificate in Form 'H' may be obtained, the manner in which such form shall be kept in custody and records relating thereto maintained and the manner in which any such forms may be used and any such certificate may be furnished in so far as they apply to declaration in Form 'C' prescribed under these rules shall mutatis mutandis apply to certificate in Form 'H'.] [(11) The declaration referred to in sub-section (8) of section 8 of the Act, shall be in Form I.] (11A) The certificate referred to in sub-section (4) of section 6 shall be in Form J and shall be furnished to the prescribed authority upto the time of assessment by the first assessing authority.]

31. Reference to Section 43 of the Assam Value Added Tax Act, 2003 which is also applicable in respect of Central Sales Tax Act, W.P(C) No. 4359/2019 Page 27 of 46 1956 by virtue of Section 9(2) of the CST Act, 1956 is very relevant. The said provision of the Assam VAT Act provides for payment and recovery of tax, penalty and interest. The said Section is extracted below:

43. Payment and recovery of tax, penalty and interest. - (1) Tax shall be paid in the manner hereinafter provided and at such intervals as may be prescribed.

(2) A dealer furnishing returns under section 29 shall pay into Government account, in such manner an date such intervals may be prescribed, the amount of tax due from him for the period covered under the return alongwith the amount of interest, penalty or any other sum payable by him and shall furnish a receipt showing the payment of such amount into the Government account. (3) A dealer furnishing a revised return in accordance with the sub- section (4) of section 29, which shows that a greater amount of tax is due than was paid or payable in accordance with te original return, shall furnish along with the return a receipt showing payment of the differential amount in the manner provided in sub-section (2). (4) (a) The amount of tax, -

(i) due where return have been filed without full payment of tax due; or

(ii) assessed under this Act less the sum already paid in respect of such period together with interest, if any; or

(b) the amount of penalty imposed under any provision of this Act; or

(c) any other dues under this Act, shall be paid by the person or dealer or the person liable therefore into the Government account within thirty days from the date of service of the notice issued by the Prescribed Authority in respect thereof;

W.P(C) No. 4359/2019 Page 28 of 46

Provided that the Prescribed Authority may, in respect of any particular dealer or person, and for reasons to be recorded in writing, allow him to pay the tax, penalty, interest or the sum forfeited, by instalments but grant of instalments to pay tax shall be without prejudice to the other provisions of this Act including levy of penalty and interest.

(5) Where a dealer fails to make payment of the tax assessed or interest levied or penalty imposed on him or any other amount due from him under this Act within thirty days of the date of service of the notice of demand, the Prescribed Authority may, after giving the dealer a reasonable opportunity of being heard, direct that such dealer shall, in addition to the amount due pay, by way of penalty, a sum not exceeding two percent of such amount of tax, penalty, interest or any other amount due, for every month, for the period for which payment has been delayed by him after the date on which such amount was due to be paid.

(6) The amount that remains unpaid after the due date of payment in pursuance of the notice issued under sub-section (4) and sub- section (5 shall be recoverable as arrears of land revenue. (7) Where in pursuance of sub-section (6), any proceedings for the recovery as an arrears on land revenue of any tax, penalty, interest or part thereof or any other amount remaining unpaid, has been commenced and the amount of tax, penalty, interest or any other amount is subsequently enhanced or reduced as a result of any assessment made or order passed in the appeal revision or rectification under this Act, the Prescribed Authority may, in such manner and within such period as may be prescribed, inform the dealer and the authority by whom or under whose order the recovery is to be made and thereupon such proceedings may be continued as if the amount of tax, penalty, interest or any other amount as modified, enhanced or reduced, had been substituted for the tax, W.P(C) No. 4359/2019 Page 29 of 46 penalty, interest or any other amount which was to be covered under sub-section (6).

(8) Where the amount paid falls short of the aggregate of the tax or any other amount due and interest payable, the amount so paid shall first be adjusted towards interest payable and the balance, if any, shall be adjusted towards the tax or any other amount due.

32. From a perusal of the said provisions extracted above, it is clear that in order to get a benefit of concessional rate of tax in respect of sale of goods to a registered dealer in the course of inter- state trade or commerce, the selling dealer shall produce a declaration in Form 'C' issued by the purchasing dealer with all particulars being duly filled up.

33. Under the CST Act, 1956 read with the Rules, there is no procedure prescribed as to how the 'C' Form submitted by the buying dealer is required to be verified and to what extent.

In that context, reference to a Judgment of the Apex Court rendered in State of Madras Vs. Radio and Electricals Ltd., reported in AIR 1967 SC 234 will be helpful. The Apex Court in this case held that the seller in inter-State transactions have no control over the purchaser. He has to refer to the representations made to him and he has to satisfy himself that the purchaser is a registered dealer, and the goods purchased are specified in the certificate. Beyond that W.P(C) No. 4359/2019 Page 30 of 46 no further duty is caste on the selling dealer. The relevant paragraph of the Apex Court is extracted below:

"Indisputably the seller can have in these transactions no control over the purchaser. He has to rely upon the representations made to him. He must satisfy himself that the purchaser is a registered dealer, and the goods purchased are specified in his certificate; but his duty extends no further. If he is satisfied on these two matters, on a representation made to him in the manner prescribed by the Rules and the representation is recorded in the certificate in form "C" the selling dealer is under no further obligation to see to the application of the goods for the purpose for which it was represented that the goods were intended to be used. If the purchasing dealer misapplies the goods he incurs a penalty under Section 10. That penalty is incurred by the purchasing dealer and cannot be visited upon the selling dealer."

(emphasis supplied)

34. In so far as the question relating to the power of cancellation of Form 'C' declaration under the CST Act, 1956 is concerned, a reference to the Judgment of the Apex Court rendered in State of Maharashtra Vs. Suresh Trading Company, reported in (1997) 11 SCC 378 would be relevant. The Judgment of the Bombay High Court was assailed before the Supreme Court. The issue before the Bombay High Court was the disallowance of the claim of deduction, turnover or sales by the assessee. In the facts of the case, the assessee before the Bombay High Court purchased goods from one Sulekha Enterprise between 1st January and 31st January, 1967 and the said Enterprise had held a valid registration. The same W.P(C) No. 4359/2019 Page 31 of 46 although was not disputed, however, the deduction in the turnover of the sales claimed by the petitioner therein was disallowed on the ground that the registration of the selling dealer stood cancelled on 20.08.1967 w.e.f. 01.01.1967. This decision of the sales tax officer was reversed by the Bombay High Court. The matter travelled to the Apex Court, the Apex Court upheld the decision of the Bombay High Court. It was held by the Apex Court that a purchasing dealer is entitled under law to rely upon the certificate of registration of the selling dealer and to act upon it. Whatever may be the effect of a retrospective cancellation upon the selling dealer, it can have no effect upon any person who has acted upon the strength of a registration certificate when the registration was current. The argument on behalf of the department that it was the duty of persons dealing with registered dealers to find out whether a state of facts exists which would justify the cancellation of registration must be rejected. It was held that to accept that argument it would be to nullify the provisions of the statute which entitle persons dealing with registered dealers to act upon the strength of registration certificates.

35. Following the Judgment of the Apex Court, several High Courts have also held that benefits once granted, will accrue and cannot be taken away by subsequent cancellation of registration. The Delhi High Court in Shanti Kiran India Pvt. Ltd. Vs. Commissioner W.P(C) No. 4359/2019 Page 32 of 46 Trade & Tax Department, reported in (2013) 57 VST 405 (Delhi) held that in the absence of any mechanism enabling a purchasing dealer to verify if the selling dealer deposited tax, for the period in question, and in the absence of notification in a manner that can be ascertained by men in business that a dealer's registration is cancelled (as has happened in this case) the benefit of input credit, under Section 9(1) cannot be denied. Furthermore, this Court notices that the cancellation of both selling dealers' registration occurred after the transactions with the appellant. The VAT authorities observed that the scanty amounts deposited by the selling dealers was incommensurate with the transactions recorded, and straightaway proceeded to hold that they colluded with the appellant. Such prior conclusions were held to be based on no material, or without inquiry, and accordingly were considered to be unworthy of acceptance.

The Orissa High Court in State of Orissa Vs. Santosh Kumar, reported in (1983) 54 STC 322 held that once a certificate of registration is issued to a person and he becomes a registered dealer, he is entitled to certain benefits under the Act. Certificates granted by the public officers have their value and people in the commercial field would in normal course accept such certificates to be genuine. Where the registration has been granted, yet if the person holding the W.P(C) No. 4359/2019 Page 33 of 46 certificate is treated to be a fictitious, it will appear contradictory to the terms prescribed under the statute. A certificate of registration can be granted only when the dealer, apart from being a businessman, satisfies the other requirements prescribed by law. A registration certificate cannot be granted to a non-existent person.

36. A similar issue was also dealt with by the Delhi High Court in Jain Manufacturing (Supra). In that case, the petitioner therein was aggrieved by the cancellation of the Form 'C' issued with regard to the purchases made by the petitioner from one Keshav Corporation. The Delhi High Court upon examining the matter held as under:

"The central issue in the present case is whether there exists a power in the Commissioner VAT, Delhi under the CST Act and the Rules thereunder to cancel a C-Form and further if such power exists then whether in the facts and circumstances of the present case such power was rightly exercised. No provision in the CST Act has been brought to the notice of the Court which enables an authority issuing a C-Form to cancel the C-Form. Rule 5(4) of the Central Sales Tax (Delhi) Rules, 2005 enables the authority which has to issue a C-Form to "withhold"

the C-Form. The contingencies under which a C Form may be withheld are set out in Rule 5(4). For instance, Rule 5 (4) (v) envisages that some adverse material has been found by the Commissioner "suggesting any concealment of sale or purchase or furnishing inaccurate particulars in the returns." The Commissioner could, in terms of the proviso to Rule 5(4), instead of withholding the C-Form, issue to the applicant such forms in such numbers and subject to such conditions and restrictions, as he may consider necessary. However, there is no specific provision even under the aforementioned Rules which enables the Commissioner to cancel the C-Form that has already W.P(C) No. 4359/2019 Page 34 of 46 been issued. There is merit in the contention that one of the primary requirements for issuance of a C-Form is that the dealer to whom the C-Form is issued has to have a valid CST registration on the date that the C Form is issued. If the purchasing dealer does not possess a valid CST registration on the date of the transaction of sale, then the selling dealer cannot insist on being issued a 'C 'Form. In the present case, on the date of the transaction i.e. 10th March, 2015 the purchasing dealer viz., Respondent No. 2 did posses a valid CST registration. The name of the purchasing dealer as shown in the invoices, and the name and address of the (18 of 28) [CW-11580/2018] registered purchasing dealer as reflected in the C-Forms issued by the DT&T matched. The cancellation of the CST registration of Respondent No. 2 took place subsequently on 4th August 2015. Therefore , there was no means for the Petitioner as the selling dealer to suspect as of the date of sale or soon thereafter that the payments made to it RTGS was not by Respondent No.2 but by some other entity with the same name. It is not possible, therefore, to straightaway infer any collusion between the Petitioner and Respondent No. 2 or for that matter the other entity of the same name spoken of by the DT&T. In any event, from the point of view of the Petitioner, the requirement of Section 8(1) of the CST stood fully satisfied. The purchasing dealer had a valid CST registration on the date of purchase of goods by the Respondent No. 2 from the Petitioner. The C-Form issued by the DT&T confirmed the registration of Respondent No.2 under the CST Act."

37. The question of cancellation of a declaration in form 'C' once validly issued came up before the Rajasthan High Court while dealing with a challenge relating to the vires of the Rules framed by the State conferred power on the authority to cancel the 'C' Forms already issued. The power under the Rajasthan Rules framed for cancellation of 'C' Forms once the validly issued was held to be ultra vires the W.P(C) No. 4359/2019 Page 35 of 46 provision under Sections 8 (4), 12 (1)(d), 13(3) and 13(4) E of the Central Sales Tax Act, 1956. In the context of the facts of the present proceedings, the findings of the Rajasthan High Court have relevance and therefore, the same is discussed. The relevant paragraphs are extracted below::

"The obligation of a registered dealer selling the goods to another registered dealer to avail the benefit of tax provided under Section 8(1) is only confined to furnish to the prescribed authority in the prescribed manner a declaration duly filled and signed by the registered dealer to whom he sells the goods. Such declaration should contain the prescribed particulars in the prescribed form and manner. Proviso to Section 8(4) stipulates that the selling dealer has to furnish such declaration within the prescribed time or within such further time as the authority may, for sufficient reason, extend. Rule 12 of the Central Rules provides a form of declaration, the particulars to be contained therein, the period within which it has to be furnished, consequence of loss of the declaration form, and the course to be adopted in that event. However, this provision does not provide for cancellation of Form C issued. No doubt, Section 13(3) of the CST Act empowers the State to make the Rules but with the rider that such Rules should not be inconsistent with the provisions of the CST Act and the Rules made by the Central Government under Section 13(1), to make the Rules to carry out the purpose of the Act. Section 13(4) of the CST Act inter-alia provides that in particular and without prejudice to the powers conferred by sub-section (3), the State Government may make rules for all or any of the purposes listed therein from Clauses (a) to (g). Clause (e) provides that the State Government may make rules prescribing "the authority from whom, the conditions subject to which and fees, subject to W.P(C) No. 4359/2019 Page 36 of 46 payment of which, any form of certificate prescribed under clause

(a) of the first proviso to sub-section (2) of section 6 or of declaration prescribed under sub-section (1) of section 6A or subsection (4) of section 8, may be obtained, the manner in which such forms shall be kept in custody and records relating thereto maintained and the manner in which any such form may be used and any such certificate or declaration may be furnished;" Beyond and in addition to that, no authority has been conferred on the States and therefore it can be safely deduced therefrom that no power has been conferred on the States to frame any Rule for cancellation of the declaration once validly issued. Rule 17(20) of the Rajasthan Rules is thus marred by lack of legislative competence and does not conform to the CST Act, having exceeded the authority conferred on the State Government under which it is purported to have been made.

In view of what we have held above, we are inclined to hold that State has no authority to frame a rule providing for cancellation of validly issued declaration form/form-C. In the result, the writ petition deserves to succeed and is hereby allowed. Rule 17(20) of the Rajasthan Rules is declared ultra vires Section 8(4), 13(1)(d), 13(3) and 13(4)(e) of the CST Act. The communications dated 20.11.2017 and 30.11.2017 sent by the respondent no.3 to the VATO Ward-17, New Delhi, with regard to cancellation of 'C' Form, are declared illegal and consequently quashed and set aside. The cancellation of 'C' Forms made vide order dated 07.12.2017 is also quashed and set aside. The petitioner is held entitled to avail benefit of rates of tax under Section 8 of the CST Act."

38. In so far as the subsequent declaration of Form 'C' as obsolete not affecting the liability of the petitioner under CST Act is concerned, the contention before this Court is that under the W.P(C) No. 4359/2019 Page 37 of 46 provision of the CST Act, declaration of Form 'C' as obsolete will not affect the liability of the petitioner in respect of the transaction undertaken prior to such declaration.

39. As have been held by the Apex Court in State of Maharashtra Vs. Suresh Trading Company, reported in (1998) 109 STC 439 (SC)that whatever may be the effect of a retrospective cancellation upon the selling dealer, it can have no effect upon any person who has acted upon the strength of a registration certificate when the registration was current. The argument on behalf of the department that it was the duty of persons dealing with registered dealers to find out whether a state of facts exists which would justify the cancellation of registration was rejected. To accept it would be to nullify the provisions of the statute which entitle persons dealing with registered dealers to act upon the strength of registration certificates.

40. Under the scheme of the CST Act read with the Rules prior to a recovery being made, there has to be an assessment. Admittedly in the facts of this case, no assessment prior to issuance of the recovery/demand notice was made.

41. In Whitney Vs. Commissioners of Inland Revenue (1926) A.C. 37at page 52:

W.P(C) No. 4359/2019 Page 38 of 46

"Now, there are three stages in the imposition of a tax: there is the declaration of liability, that is, the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex hypothesi, has already been fixed. But assessment particularizes the exact sum which a person liable has to pay. Lastly comes the methods of recovery, if the person taxes does not voluntarily pay."

Following the above observation Lord Hanworth, M.R. in W.H. Cockerline & Co. V. Commissioners of Inland Revenue (1930) 16 Tax Case 1 observed at page 19:

"...........but the charge is made in consequence of the Act, upon the subject; the assessment is only for the purpose of quantifying it."

42. The Apex Court in the case of in the case of CCE Vs. National Tobacco 28 Co. of India Ltd. reported in (1972)2 SCC 560 in paragraph 19 held as under:

"19. The term 'levy' appears to us to be wider in its import than the term 'assessment'. It may include both 'imposition' of a tax as well as 'assessment'. The term 'imposition' is gene rally used for the, levy of a tax or duty by legislative provision indicating the subject matter of the tax and the rates at which it has to be taxed. The term 'assessment', on the other hand, is generally used in this country for the actual procedure adopted in fixing the liability to pay a tax on account of particular goods or property or whatever may be the object of the tax in a particular case and determining its amount. The Division Bench appeared to equate 'levy' with an 'assessment' as well as with the collection of a tax when it. held that 'when the payment of tax is enforced, there is a levy'. We think that, although the connotation of the term 'levy' seems wider W.P(C) No. 4359/2019 Page 39 of 46 than that of 'assessment', which it includes, yet, it does not seem to us to extend to 'collection'. Article 265 of the Constitution makes a distinction between "levy" and "collection".

43. Again in the case of Somaiya Organics (India) Ltd. Vs. State of U.P., reported in (2001)5 SCC 519, the Apex Court held as under:

"29. The words used in Article 265 are 'levy' and 'collect'. In taxing statute the words 'levy' and 'collect' are not synonymous terms while 'levy' would mean the assessment or charging or imposing tax, 'collect' in Article 265 would mean the physical realization of the tax which is levied or imposed. Collection of tax is normally a stage subsequent to the levy of the same"

44. In Income-Tax Officer &Anr. Vs. Seghu Buchiah Setty, (1964) ITR 538, the ratio laid down by the Apex Court in respect of a notice of demand is very relevant. The Apex Court held that the notice of demand is a vital document in many respects. Disobedience to it makes the assessee a defaulter. It is a condition precedent to the treatment of the tax as an arrear of land revenue. It is the starting point of limitation in two ways and the breach of obedience to the notice of demand draws a heavy penalty. The notice of demand which is issued must be in a form prescribed by Rule 20 and the form includes the following particulars - the amount which has to be paid and indicates the person to whom, the place where and the time within which it has to be so paid W.P(C) No. 4359/2019 Page 40 of 46

45. Mere mechanical adjustments or ostensible settlement of accounts will not be treated to be an assessment. The assessment if required to be made has to be scrupulously undertaken in terms of the provisions of the Act. In Assistant Collector General, Kolkata Division Vs. National Tobacco Co. of India Ltd, reported in (1972) 2 SCC 560, the Apex Court observed that a mechanical adjustment and ostensible settlement of accounts, by making debit entries, was undertaken by the Department. But that could not be equated with an assessment which is a quasi-judicial process which involves due application of mind to the facts as well as to the requirements of law. an accordingly it held that unless the Court is bound by law to give such an unusual interpretation to the term "assessment", it do not find any such definition of assessment or any compelling reason to hold that what could at most be a mechanical provisional collection, which would become a "levy" in the eye of law only after an "assessment", was itself a levy or an "assessment".

46. In the facts of the case, the selling dealer namely the writ petitioner herein, is a registered dealer within the State of Assam. It had sold its goods namely, Pan Masala to a registered dealer in the State of Haryana. This sale according to the writ petitioner is a sale undertaken in the course of inter-State trade and commerce and not W.P(C) No. 4359/2019 Page 41 of 46 a sell within the Assam. Consequently, upon the Form 'C' declaration being furnished by the selling dealer namely the writ petitioner for the period indicated, the petitioner had availed the benefit of concessional sales tax as prescribed under Section 8 of the CST read with Rule 12 of the CST Rules. The dispute between the State and the writ petitioner has arisen pursuant to a communication which was issued by the competent department of Tax & Excise from the State of Haryana informing the competent authorities in the State of Assam that the 'C' Form which was issued in favour of the writ petitioner were found to be fraudulently obtained and that the Department is in the process of declaring the Forms as obsolete.

47. It was further intimated that the said 'C' Forms for these transactions have been cancelled and the concerned authorities of the State of Assam are not to give the benefit of concessional sales to the dealer of the State namely the writ petitioner as no such purchases have been made by the Haryana Dealer.

48. The respondent authorities on the basis of this communication intimated the petitioner by the impugned notices dated 03.07.2018 and 27.11.2018 requiring the petitioner to deposit the balance amount payable against the transaction mentioned in the Form 'C' declaration during the period 01.01.2016 to 31.03.2016 in W.P(C) No. 4359/2019 Page 42 of 46 respect of M/s Om Traders, Gurugram, Haryana for an amount of Rs. 626018432.00.

49. After careful examination of the Judgments of the Apex Court as well as the various provisions of the Act and the Rules, it is seen that once the selling dealer verifies that the purchasing dealer is also a registered dealer and the particulars of the goods purchased and the period of trading along with the other particulars as may be prescribed under the Form are duly filled with, there is no scope for the selling dealer to go beyond such particulars provided/furnished by the purchasing dealer to find out the authenticity of the background of such a dealer. Therefore in the absence of any such provisions to the contrary under the Act and the Rules, no such burden is cast upon the selling dealer. Therefore, where the selling dealer furnishes a duly filled up Form 'C' declaration with all relevant particulars, he is entitled to be granted the benefit under Statute 8 by the competent authorities. In the event such Form 'C' declarations furnished by the buying dealer are found to be incorrect or contrary to the provisions of law, the benefits which are enjoyed by the selling dealer under the provisions of CST read with the Rules cannot be denied to the selling dealer on that ground, without there being any proper investigation and enquiry as may be prescribed under the provisions of the law. W.P(C) No. 4359/2019 Page 43 of 46

50. From the pleadings, it is seen that the transactions took place between the periods 29.01.2016 to 29.03.2016. And the communication received from the Excise and Taxation Officer-cum- Assessing Officer, Gurgaon, Haryana was received by the respondent department on 19.02.2018. From the communication although it is seen that the 'C' Forms have been declared obsolete but since no specific date from which the 'C' Forms have been declared obsolete is mentioned, as such it will have to be accepted that the effective date for declaration of the 'C' Forms will be from the date of knowledge which is the date of communication dated 19.02.2018 issued by the Excise and Taxation-cum-Assessing Authority-cum-Officer. Such a declaration unless otherwise specified cannot be made effective retrospectively.

51. As such it has to be held that declaration that the 'C' Forms are obsolete by the Haryana Taxation Department can only be accepted to be effective from the date of the communication which is 19.02.2018. That apart the Haryana Taxation Department did not undertake any proceedings to cancel the said 'C' Forms. No information to that effect is placed before this Court by the respondents. It will therefore not take away any benefit that had accrued to the assessee well prior to the date of the communication. Where the mandate of the Statute is clear, the benefits that accrue to W.P(C) No. 4359/2019 Page 44 of 46 a dealer must be conferred to the full extent as permitted under the Statute without any restrictions unless by way of resorting to any procedure prescribed by the Statute. It has to be therefore held that the petitioner cannot be denied the benefit available under the Statute, merely on the pretext of the communication dated 19.02.2018 received from the Haryana Taxation Department which by any latitude cannot be treated to any order passed by the said Department as per the procedure prescribed under the Statute.

52. As is the mandate of Section 43 of the Assam VAT Act, 2003, that if the dealer fails to make payment of the tax assessed or interest levied or penalty imposed under the Act within a period of 30 days from the date of service of the notice, the prescribed authority may after giving the dealer a reasonable opportunity of being heard direct that such a dealer shall in addition to the amount due pay by way of penalty, a sum not exceeding 2% of such amount of tax, penalty, interest and any other amount due for every month for the period for which the payment has been delayed after the date on which the amount was due to be paid.

53. In the facts of the present case, no assessment admittedly was carried out by the Assessing Officer and therefore, Section W.P(C) No. 4359/2019 Page 45 of 46 43(A)(ii) is not attracted in the facts of the present case requiring the respondents to raise any such demand on the assessee/petitioner.

54. From the provisions of Section 43, it is clear that the liability of payment arises only after expiry of 30 days from the date of service of the notice on demand. The notice of demand can be issued only after completion of the assessment. However, no assessment was undertaken by the respondents in the present case.

55. Since no assessment was completed, there can be no demand made. Under such circumstances, the petitioner cannot be treated to be a defaulter and consequently no notice of demand could have been issued. Since the impugned notices have been issued without there being a proper assessment and in terms of the provisions of Assam VAT Act, 2003 it reveals that there was complete no application of mind by the respondent authority. The impugned notices dated 03.07.2018 as well as 27.11.2018 are therefore bad in law and the same are therefore set aside and quashed.

56. The writ petition is accordingly, allowed in terms of the above. No order as to cost.

JUDGE Comparing Assistant W.P(C) No. 4359/2019 Page 46 of 46

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